Taming KYC — How to Control-Spiraling-Know-Your-Customers Costs and Complexity

Let’s face the facts. Taming Know Your Customer (KYC) costs and complexities across multiple jurisdictions is certainly no walk in the park. A Thompson Reuter survey reveals escalating costs and complexity and it’s having a negative impact on financial institutions (FIs). Eighty-nine percent of corporate customers have not had a good KYC experience, so much so, that 13 percent have actually switched to another FI as a result.

Besides the poor customer experience, the actual cost of running a comprehensive KYC compliance program continues to rise. Amongst the 800 FIs in the survey, the average was $60 million annually while some firms were spending up to $500 million. In the UK, a Consult Hyperion report estimates KYC compliance costs for AMLD 4 cost banks £47 million a year, while each check runs £10 to £100.

In the same report, AMLD 5, with an expected implementation timeframe of 12 months, “will increase these costs substantially as the frequency of KYC checks increase and more transaction types fall within its scope.” As more jurisdictions apply criteria found in the new AML directives, such as deeper beneficial ownership requirements, the costs for KYC will continue to rise.

While there are substantial issues with the current state of KYC, there are no real proposals to curtail the requirements. KYC is too important in the fight against money laundering, terrorist financing and fraud to roll-back. The only option is to optimize performance by improving the processes to cut costs and improve the customer experience.

Why is KYC so Inefficient?

KYC rules are a work-in-progress, a cat-and-mouse game between regulators and cash obfuscation. Uncovering new tax evasion and money laundering techniques spurs the creation of new regulations to stop the technique and put a lid on corruption. Each new sophisticated financial structure designed to hide money begets a new rule to close the loophole.

All these new rules and requirements, along with the global nature of finance makes keeping up with all the changes in KYC excruciating. A full 87 percent of banks and 75 percent of investment managers point to all the changes as the most influential factor in their KYC processes, according to the Thompson Reuter survey.

Many KYC processes are stuck in an era where people had no choice but to physically go to a bank to open an account or access other financial services. For every interaction, there’s a paper trail that requires manual processing. That means staff filling in forms, making copies, sending version, and updating records. And, as human resources are often the biggest expense of a company, that means money.

Manual processes are slow. Every step of the workflow slows to a grind, waiting on a previous step. Workers get frustrated dealing with mounds of endless paperwork, decreasing productivity and adding mistakes that could easily be prevented with technology. A mistype here, a misfiling there, adds even more time and cost to the entire process, as well as adding to customer frustration who often need to refile.

That’s the way we’ve always done it, is not an acceptable answer anymore. KYC processes should incorporate use of the new array of smart tools to speed the process, improve detection of problems and lower costs.

Digital KYC

AI (Artificial Intelligence) solutions help keep up with all the regulatory changes in multiple jurisdictions. AI uses natural language processing to monitor all the various legal text, track changes and provide interpretative analysis. The technology can cross reference word pairings to find similarities and compare that to other documentation. It can then note where there are correlations or overlaps to quickly flag potential issues.

Of course, AI isn’t at the level where it can provide deep legal or compliance analysis, but that doesn’t mean it can’t be effective. Often, financial regulations are hundreds of pages long for one piece of legislation, so tracking all the inter-connected rules is a massive undertaking. Simplifying the maze to allow your experts to focus on the significant interpretations saves significant time and concentrates their brain power on the most interesting and valuable aspects of their jobs.

All workflows, where possible, should take advantage of digital processes. There might be situations, such as outdated legislation or hard-to-change legacy requirement, where digital techniques can’t be used for KYC. However, these are the exception and are on their way out; full digital KYC is the near-future and companies that fight it will find themselves on the losing side.

There are numerous reason why digital KYC will prevail:


The Thompson Reuter survey indicates that 30% of respondents stated it takes over two months to on-board a new client, while 10% indicate it takes over four months. This is damaging client relationships, has a negative impact on the brand, and is hurting revenue growth as some customers abandon the process. Faster digital KYC processes improves all these factors.


Mistakes slow down the process and add to cost; digital processes can automatically check for errors and more quickly fix any mistakes.


While digital KYC systems do have costs, their faster speeds, improved accuracy and better utilization of compliance resources provide better bang for the buck and improve scalability.


As regulations constantly change, compliance systems need to correspondingly change. Digital KYC workflows can change almost on the fly; in many cases, simply update a ruleset and you’re done.


Digital KYC, for the most part, is about using APIs to easily add functionality. With new APIs being added all the time, new capabilities are a simple integration away.


Digital data is seamlessly transferable in its native form to analytics, tracking and reporting systems creating opportunities for optimization and strategic analysis.

Customer Experience

Not only is digital KYC a quicker process, it is easier from the get-go for the customer. The entire process is often mobile or internet-only thus delivering a smooth, convenient experience.


Your compliance and legal teams are high-paid, intelligent, valuable resources. Digital KYC enables a better, more interesting work environment resulting in a more engaged work force.

Here at Trulioo, we are big believers of digital KYC or eKYC. Our electronic identity verification service is a shining example to numerous financial institutions on how to control KYC costs and complexity. The rules and regulations of KYC are not getting easier; only through digital KYC can companies attain the control they require.